As Malaysia aspires to become a high-income nation, various measures have been undertaken to accelerate the shift to a high-technology and knowledge-intensive economy.
Malaysians are finding it increasingly difficult to cope with the rising costs due to structural wage stagnation, thereby placing an added burden on the government to provide subsidies and cash transfers to alleviate pressures on the people.
Nonetheless, the absolute benefit of the growth has yet to be translated into fair income distribution, including the need to address the longstanding low labour income issue.
The introduction of the minimum wage in 2013 was a significant progressive step, but more needs to be done if the Madani Economy framework’s target of raising compensation of employees to 45% of gross domestic product is to be realised.
A study by Khazanah Research Institute in 2023 on wage growth from 2010 to 2019 produced three key findings.
First, the Malaysian labour market is dependent on policy interventions such as minimum wage to ensure equitable and inclusive wage growth.
The study also finds that wage growth is suppressed and broadly regressive without policy measures.
Second, the effects of the minimum wage are limited to the lowest wage earners, with the middle wage earners experiencing the lowest growth during the period.
In ringgit terms, the wage growth of the middle wage earners is even lower than the growth of the lowest 30% wage earner group.
Third, wage stagnation is found to be a central feature of the Malaysian labour market despite the effects of minimum wage.
The bottom 50% of workers only experienced an increase of the real monthly wage by approximately RM500 during the 2010-2019 period, which translates to a rough increase of RM65 per year.
These findings provide a basis to comprehend the vulnerability of Malaysian households when confronted with rising costs, as their wage increments have arguably been insufficient to provide a buffer against future shocks.
While structural challenges are a source of the wage conundrum, dismal wage levels are themselves at the root of trends that feedback to Malaysia’s structural problems.
Two prominent trends that are linked to the lack of well-paying employment are brain drain and the increasing levels of non-standard employment such as gig work.
“Companies in the private sector should consider increasing wages to match productivity and performance,” says Prime Minister Datuk Seri Anwar Ibrahim.
He said this is especially so for those that have recorded substantial profits, adding that a Statistics Department study found that productivity registered “good numbers” but the rise in wages was “very moderate”.
“I hope with the announcement of the interim payment for civil servants, the private sector, too, will look at… (staff) wages,” he said at the Prime Minister’s Department monthly assembly on Monday (Oct 16).
Anwar, who is also Finance Minister, announced when tabling Budget 2024 on Oct 13 that civil servants Grade 56 and below were to receive an interim payment of RM2,000 while the government reviews the salary and allowance scheme.
Those in the Jawatan Utama Sektor Awam (Jusa) as well as all retirees from the civil service would receive RM1,000.
On the review of civil servants’ salary and the allowance scheme, the Prime Minister said the target was for it to be ready by the middle of next year so that important announcements could be made in the next Budget.
He said while many did not anticipate such an amount to be paid out, the government felt that it was justified as the scheme had not been reviewed for 10 years.
“I have told the Public Service director-general that the review must be comprehensive and that all departments and sectors are given the opportunity to state their case,” he said.
In July, Anwar had said he would look into the salary and allowance scheme for civil servants. – The Star
